Author: SC
Timber stocks in the TF Forest-Based Construction Tracker range from forest owners to engineered wood products manufactureres and distributors located in both North America and Europe. These stocks are exposed to several market factors – the analysis presented here (download) quantifies the importance of different factors and tries to identify some drivers of stock returns for this group of companies through Principal Component Analysis (PCA), in particular estimating:
1) the variance across stock returns that is explained by each factor
Figure 1: Variance explained (%) by each principal component
2) the relative importance of each component for each stock.
Figure 2: Loading for each stock on each principal component
In the analysis, each sub-sector (Primary Products, Secondary Products, Timberland REITs and Integrated Forest Owners) is discussed, in addition to the wider universe.